klp kommunekreditt as

Interim report KLP KOMMUNEKREDITT AS

Q3 2021

INTERIM FINANCIAL STATEMENTS 3

INCOME STATEMENT 5

BALANCE SHEET 6

STATEMENT OF CHANGES IN EQUITY 7

STATEMENT OF CASH FLOW 8

NOTES TO THE ACCOUNTS 9

NOTE 1 General information 9

NOTE 2 Accounting principles 9

NOTE 3 Net interest income 10

NOTE 4 Loans to customers 10

NOTE 5 Categories of financial instruments 11

NOTE 6 Fair value hierarchy 13

NOTE 7 Debt securities issued - stock exchange listed covered bonds and certificates 15

NOTE 8 Over-collateralisation 15

NOTE 9 Liabilities to credit institutions 16

NOTE 10 Financial assets and liabilities subject to net settlement 17

NOTE 11 Transactions with related parties 18

NOTE 12 Other assets 18

NOTE 13 Other liabilities and provision for accrued costs 19

NOTE 14 Capital adequacy 20

NOTE 15 Fixed-income securities 21

NOTE 16 Contingent liabilites 21

NOTE 17 Net gain/(loss) on financial instruments 21

NOTE 18 Loan loss provision 22

Quarterly earnings trend 23

Key figures - accumulated 23

Table of contents

KLP KOMMUNEKREDITT AS

KLP Kommunekreditt AS Q3 2021

Main features by third quarter end:

• Stable lending volume

• Normalized margins

• No recognized losses on lending OBJECTIVE The Company's objective is long-term financing of municipalities, county administrations and enterprises carrying out public sector assignments. Loans to companies must be guaranteed by municipalities, county administrations or the central government under the Norwegian Local Government Act. Guarantees are to be of the ordinary surety type covering both repayments and interest. The lending business is principally funded issuing covered bonds (OMF). KLP Kommunekreditt AS is a wholly owned subsidiary of KLP Banken AS. The KLP Banken Group is owned by Kommunal Landspensjonskasse (KLP). INCOME STATEMENT Net interest income by third quarter was NOK 47.2 (57.4)¹ million. As at third quarter, the company's net interest income is lower that at the same time last year, but there is little change in the lending balance. The Company’s lending margins thus have come down to more normal levels, after showing great variations during the pandemic. Net profit and loss effects on financial instruments so far this year amounted to NOK -25.0 (-17.5) million and comprise both assets and liabilities combined. Operating expenses at the end of the quarter amounted to 12.9 (12.0) million. The Company has not had any lending credit losses and have very low loan loss provisions. The pre-tax profit by quarter end was NOK 9.4 (27.8) million. The change in profit is mainly due to decreased lending margins and the negative loss effects on financial instruments. LENDING The Company's loans to customers as of 30 September 2021, amounted to NOK 16.8 (16.9) billion. The Company's borrowers are municipalities, county municipalities and local government enterprise lending covered by municipal guarantees.

LIQUID INVESTMENTS KLP Kommunekreditt AS has strict rules on what assets may be included in the securities holdings. In addition to loans to the public sector the securities holdings consist of secure bonds as well as deposits in other banks. The securities consist of certificates and bonds of high credit quality, principally investments in covered bonds. As of 30 September 2021, the Company’s securities portfolio market value was NOK 1.6 (2.1) billion. Realized and unrealized market value changes so far this year has created a loss of NOK -1.2 (0.3) million. BORROWING The Company's borrowing consists of covered bonds (OMF) as well as loans from KLP Banken AS. So far in 2021, new covered bond issues amounted NOK 2.5 (4.0) billion and net repurchase of previous issues was NOK -2.8 (0.4) billion. All covered bonds have AAA rating. The Company regularly restructures its borrowing with the purpose of adjusting average duration. This may cause both loss and gain. Buying back own bond issues have caused a net booked loss of NOK -23.8 (-17.9) million so far this year. RISK AND CAPITAL ADEQUACY KLP Kommunekreditt AS has established a framework for risk management aimed at ensuring that risks are identified, analyzed and subject to management using policies, limits, routines and instructions. The Company is to have a prudent risk profile and earnings are to be principally a result of the borrowing and lending activity as well as liquidity management. This means that the Company is to have low market risk. Interest risk arising within the borrowing and lending activities are reduced using derivatives. The Company is to have sufficient long-term financing within set limits. The credit risk in the Company is very low and lending is limited to local government risk. Management of the Company's liquidity is conducted through investments in banks satisfying high credit quality requirements. At the end of the third quarter 2021, core capital i.a.w. the capital adequacy rules were NOK 743 (716) million. Loans to municipalities and county administrations are risk-weighted 20 per cent in accordance with the authorities' capital adequacy regulations. KLP Kommunekreditt AS had a core capital adequacy and capital adequacy ratio of 20.1 (18.8) per cent at the end of the third quarter. The minimum statutory requirement is 14.5 per cent capital adequacy ratio. Leverage ratio was 3.9 (3.7) per cent. The minimum statutory requirement is 3.0 per cent.

¹Figures in parenthesis are from the corresponding period last year.

Interim Financial Statements KLP KOMMUNEKREDITT AS


Oslo, 27 October 2021

Aage E. Schaanning Aina Slettedal Eide

Chair

Aud Norunn Strand Kristian Lie-Pedersen

Carl Steinar Lous

Managing Director


NOTE NOK THOUSANDS Q3

2021 Q3

2020 01.01.2021

-30.09.2021 01.01.2020

-30.09.2020 01.01.2020

-31.12.2020

Interest income, effective interest method 53 390 58 267 168 708 248 234 305 293

Other interest income 9 868 21 835 31 175 90 198 108 258

3 Total interest income 63 258 80 103 199 883 338 432 413 551

Interest expense, effective interest method -29 457 -33 849 -96 831 -203 252 -241 866

Other interest expenses -17 666 -22 056 -55 831 -77 824 -99 274

3 Total interest costs -47 123 -55 905 -152 662 -281 076 -341 140

3 Net interest income 16 135 24 198 47 221 57 356 72 411

17 Net gain/(loss) financial instruments -2 858 -2 318 -24 987 -17 525 -19 164

Total other operating income -2 858 -2 318 -24 987 -17 525 -19 164

Other operating expenses -4 864 -3 159 -12 882 -12 021 -18 528

18 Net loan losses -1 4 7 -5 -13

Total operating expenses -4 865 -3 154 -12 874 -12 026 -18 540

Operating profit/loss before tax 8 413 18 726 9 360 27 805 34 706

Tax ordinary income -1 851 -4 120 3 396 2 835 1 317

Profit for the period 6 562 14 606 12 756 30 641 36 023

Other comprehensive income for the period

0 0 0 0 0

Comprehensive income for the period 6 562 14 606 12 756 30 641 36 023

Income statement KLP KOMMUNEKREDITT AS


NOTE NOK THOUSANDS 30.09.2021 30.09.2020 31.12.2020

ASSETS

5 Loans to credit institutions 365 186 231 373 447 030

4,5 Loans to customers 16 842 207 16 932 681 17 654 327

5,6,15 Fixed-income securities 1 584 626 2 121 842 863 851

5,6 Financial derivatives 44 845 88 126 42 630

12 Other assets 12 759 7 087 237

Total assets 18 849 622 19 381 108 19 008 076

LIABILITIES AND OWNERS EQUITY

LIABILITIES

5,9 Debt to credit institutions 1 005 136 515 053 745 103

5,7 Debt securities issued 17 029 733 17 990 601 17 429 657

5,6 Financial derivatives 35 703 127 709 77 831

Deferred tax liabilities 3 565 1 385 3 565

13 Other liabilities 23 103 7 026 7 187

13 Provision for accrued costs and liabilities 385 18 36

Total liabilities 18 097 624 18 641 793 18 263 379

EQUITY

Share capital 362 500 362 500 362 500

Share premium 312 500 312 500 312 500

Other owners' eqyity 64 242 33 674 69 697

Unallocated profit/loss 12 756 30 641 0

Total owners' equity 751 998 739 315 744 697

Total liabilities and equity 18 849 622 19 381 108 19 008 076

Balance sheet KLP KOMMUNEKREDITT AS


2021 NOK THOUSANDS

Share capital

Share premium

Other equity

Total owners' equity

Equity 1 January 2021 362 500 312 500 69 697 744 697

Profit for the period 0 0 12 756 12 756

Other comprehensive income 0 0 0 0

Total comprehensive income for the period 0 0 12 756 12 756

Group contribution received 0 0 19 343 19 343

Group contribution made 0 0 -24 798 -24 798

Total transactions with the owners 0 0 -5 456 -5 456

Equity 30 September 2021 362 500 312 500 76 998 751 998

2020 NOK THOUSANDS

Share capital

Share premium

Other equity


Equity 1 January 2020 362 500 312 500 94 367 769 367






Equity 30 September 2020 362 500 312 500 64 315 739 315

2020 NOK THOUSANDS

Share capital

Share premium

Other equity


Equity 1 January 2020 362 500 312 500 94 367 769 367






Equity 31 December 2020 362 500 312 500 69 697 744 697

Statement of changes in equity KLP KOMMUNEKREDITT AS


NOK THOUSANDS 01.01.2021

-30.09.2021 01.01.2020

-30.09.2020 01.01.2020

-31.12.2020

OPERATIONAL ACTIVITIES

Payments received from customers - interest, commission & charges

153 169 248 556 328 355

Disbursements on loans customers & credit institutions

-622 719 -1 855 372 -3 405 493

Receipts on loans customers & credit institutions 1 336 845 1 533 567 2 275 762

Disbursements on operations -14 650 -13 155 -18 135

Net receipts/disbursements from operating activities 4 592 -3 865 2 366

Net interest investment accounts 489 539 1 940

Net cash flow from operating activities 857 726 -89 730 -815 205

INVESTMENT ACTIVITIES

Payments on the purchase of securities -1 406 177 -2 682 010 -3 285 779

Receipts on sale of securities 677 202 1 926 723 3 787 878

Receipts of interest from securities 8 737 22 889 26 544

Net cash flow from investment activities -720 238 -732 399 528 643

FINANCING ACTIVITIES

Receipts on loans from credit institutions 2 500 000 4 000 000 4 000 000

Repayments and redemption of securities debt -2 760 000 -3 829 000 -4 732 110

Change in buyback of securities debt -125 771 404 000 804 000

Net payment of interest on loans credit institions -103 566 -250 908 -289 937

Receipts in internal funding 750 000 3 040 000 4 165 000

Disbursements in internal funding -490 000 -2 845 000 -3 740 000

Net payment of interest on internal funding -896 -4 363 -4 762

Payment on group contribution -5 456 -60 693 -60 693

Net cash flows from financing activities -235 689 454 036 141 498

Net cash flow during the period -98 201 -368 092 -145 064

Cash and cash equivalents at the start of the period 442 579 587 644 587 644

Cash and cash equivalents at the end of the period 344 378 219 551 442 579

Net receipts/disbursements of cash -98 201 -368 092 -145 064

Statement of cash flow KLP KOMMUNEKREDITT AS


NOTE 1 General information

KLP Kommunekreditt AS was formed on 25 August 2009.

The company is a credit enterprise that provides or

acquires public sector loans that are guaranteed by the

Norwegian municipalities. Borrowers provide surety

covering both repayments and interest.

The object of the Company is primarily to finance activities

by issuing covered bonds with security in public sector

guarantees loans. Parts of these loans are listed on Oslo

Børs (Stock Exchange).

KLP Kommunekreditt AS is registered and domiciled in

Norway. It's head office is at Beddingen 8 in Trondheim,

and the company has a branch office in Dronning

Eufemiasgate 10 in Oslo.

The company is a wholly-owned subsidiary of

KLP Banken AS which is in turn wholly-owned by

Kommunal Landspensjonskasse (KLP). KLP is a mutual

insurance company.

NOTE 2 Accounting principles

The interim report includes the interim Financial

Statements of KLP Kommunekreditt AS for the period

1 January 2021 – 30 September 2021, with a specification

of the results in the Q3. The interim Financial Statements

has not been audited.

The interim financial statements have been prepared in

accordance with IAS 34 "Interim Financial Reporting".

Other accounting principles and calculations are the same

in the interim financial statement as in the annual report

for 2020, please see the annual report for further

information.

Notes to the accounts KLP KOMMUNEKREDITT AS


NOTE 3 Net interest income

NOK THOUSANDS Q3

2021 Q3

2020 01.01.2021

-30.09.2021 01.01.2020

-30.09.2020 01.01.2020

-31.12.2020

Interest income on loans to customers 53 220 58 114 168 070 246 555 303 354

Interest income on loans to credit institutions 170 154 638 1 678 1 940

Total interest income, effective interest method 53 390 58 267 168 708 248 234 305 293

Interest income on bonds and certificates 2 835 5 470 7 068 23 398 26 841

Other interest income 7 033 16 365 24 107 66 800 81 416

Total other interest income 9 868 21 835 31 175 90 198 108 258

Total interest income 63 258 80 103 199 883 338 432 413 551

Interest expenses on debt to KLP Banken AS -391 -460 -929 -4 246 -4 695

Interest expenses on issued securities -29 066 -33 389 -95 902 -199 006 -237 171

Total interest expenses, effective interest method

-29 457 -33 849 -96 831 -203 252 -241 866

Other interest expenses -17 666 -22 056 -55 831 -77 824 -99 274

Total other interest expenses -17 666 -22 056 -55 831 -77 824 -99 274

Total interest expenses -47 123 -55 905 -152 662 -281 076 -341 140

Net interest income 16 135 24 198 47 221 57 356 72 411

NOTE 4 Loans to customers

NOK THOUSANDS 30.09.2021 30.09.2020 31.12.2020

Loans to customers before write-downs 16 803 545 16 768 017 17 551 888

Write-downs steps 1 and 2 -166 -165 -173

Loans to customers after write-downs 16 803 379 16 767 852 17 551 715

Accrued interest 55 266 63 364 40 365

Fair value hedging -16 439 101 464 62 247

Loans to customers 16 842 207 16 932 681 17 654 327

All lending comprises loans to, or loans guaranteed by, Norwegian municipalities and county administrations, including loans to local government enterprises and intermunicipal (public sector lending). Guarantees are of the ordinary surety type covering both repayments and interest.


NOTE 5 Categories of financial instruments

NOK THOUSANDS 30.09.2021 30.09.2020 31.12.2020

Capitalized

value Fair

value Capitalized

value Fair

value Capitalized

value Fair

value

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS

Fixed-income securities 1 584 626 1 584 626 2 121 842 2 121 842 863 851 863 851

Financial derivatives 44 845 44 845 88 126 88 126 42 630 42 630

Total financial assets at fair value through profit and loss

1 629 471 1 629 471 2 209 968 2 209 968 906 482 906 482

FINANCIAL ASSETS FAIR VALUE HEDGING

Lending to Norwegian municipalities 2 771 019 2 821 710 3 514 842 3 566 041 3 659 595 3 715 811

Total financial assets fair value hedging

2 771 019 2 821 710 3 514 842 3 566 041 3 659 595 3 715 811

FINANCIAL ASSETS AT AMORTIZED COST

Loans to and receivables from credit institutions

365 186 365 186 231 373 231 373 447 030 447 030

Lending to Norwegian municipalities 14 071 188 14 071 188 13 417 839 13 417 839 13 994 732 13 994 732

Total financial assets at amortized cost

14 436 374 14 436 374 13 649 211 13 649 211 14 441 762 14 441 762

Total financial assets 18 836 864 18 887 555 19 374 021 19 425 221 19 007 838 19 064 054

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS

Financial derivatives 35 703 35 703 127 709 127 709 77 831 77 831

Total financial liabilities at fair value through profit and loss

35 703 35 703 127 709 127 709 77 831 77 831

FINANCIAL LIABILITIES FAIR VALUE HEDGING

Covered bonds issued 1 118 675 1 127 681 1 869 145 1 878 218 1 139 041 1 148 872

Total financial liabilities fair value hedging

1 118 675 1 127 681 1 869 145 1 878 218 1 139 041 1 148 872

FINANCIAL LIABILITIES AT AMORTIZED COST

Liabilities to credit institutions 1 005 136 1 005 136 515 053 515 053 745 103 745 103

Covered bonds issued 15 911 058 16 617 982 16 121 456 16 196 335 16 290 616 16 873 438

Total financial liabilities at amortized cost

16 916 194 17 623 117 16 636 509 16 711 388 17 035 718 17 618 541

Total financial liabilities 18 070 571 18 786 501 18 633 364 18 717 315 18 252 590 18 845 243


NOTE 5 Categories of financial instruments (continues)

Fair value shall be a representative price based on what a

corresponding asset or liability would have been traded

for on normal market terms and conditions. A financial

instrument is considered to be listed in an active market

if the listed price is simply and regularly available from a

stock market, dealer, broker, industry grouping, price

setting service or regulatory authority, and these prices

represent actual and regularly occurring transactions at

arm’s length. If the market for the security is not active,

or the security is not listed on a stock market or similar,

valuation techniques are used to set fair value. These are based for example on information on recently completed

transactions carried out on business terms and

conditions, reference to trading in similar instruments

and pricing using externally collected yield curves and

yield spread curves. As far as possible the estimates are

based on externally observable market data and rarely on

company-specific information.

The different financial instruments are thus

priced in the following way:

Fixed-income securities - government

Bloomberg is used as a source for pricing Norwegian

government bonds. The prices are compared with the

prices from Nordic Bond Pricing to reveal any errors.

Fixed-income securities - other than government

Norwegian fixed-income securities except government

are generally priced using prices from Nordic Bond

Pricing. Those securities that are not included in Nordic

Bond Pricing are priced theoretically. The theoretical

price is based on the assumed present value on the sale of

the position. A zero-coupon curve is used for discounting.

The zero-coupon curve is adjusted upwards by means of a

credit spread, which is to take account of the risk the

bond entails. The credit spread is calculated on the basis

of a spread curve taking account of the duration of the

bond. Nordic Bond Pricing is the main source of spread curves. They provide company-specific curves for

Norwegian saving banks, municipalities and energy.

Saving banks have various spread curves based on total

assets. For companies where Nordic Bond Pricing do not

deliver spread curves, the Group use spread curves from

three Norwegian banks. When spread curves are available

from more than one of these banks, an equal-weighted

average is used. If a bond lacks an appropriate spread

curve, spread from a comparable bond from the same

issure is used.

Financial derivatives

These transactions are valued based on the applicable

swap curve at the time of valuation. Derivative contracts

are to be used only to hedge balance amounts and to

enable payments obligations to be met. Derivative

contracts may be struck only with counterparties with high credit quality.

Fair value of loans to Norwegian local

administrations

Fair value of lending without fixed interest rates is

considered virtually the same as book value since the

contract terms are continuously changed in step with

market interest rates. Fair value of fixed rate loans is

calculated by discounting contractual cash flows by the

marked rate including a relevant risk margin on the

reporting date. This is valued in Level 2 in the valuation

hierarchy, cf. note 6.

Fair value of loans to and receivables from credit

institutions

All receivables from credit institutions (bank deposits)

are at variable interest rates. Fair value of these is

considered virtually the same as book value since the

contract terms are continuously changed in step with

marked interest rates. This is valued in Level 2 in the

valuation hierarchy, cf. note 6.

Fair value of liabilities to credit institutions

These transactions are valued using a valuation model,

including relevant credit spread adjustments obtained

from the market. This is valued in Level 2 in the valuation

hierarchy, cf. note 6.

Liabilities created on issuance of covered bonds

Fair value in this category is determined on the basis of

internal valuation models based on external observable

data. This is valued in Level 2 in the valuation hierarchy,

cf. note 6.


NOTE 6 Fair value hierarchy

30.09.2021 NOK THOUSANDS

Level 1 Level 2 Level 3 Total

ASSETS BOOKED AT FAIR VALUE

Fixed-income securities 99 976 1 484 651 0 1 584 626

Financial derivatives 0 44 845 0 44 845

Total assets at fair value 99 976 1 529 495 0 1 629 471

LIABILITIES BOOKED AT FAIR VALUE

Financial derivatives (liabilities) 0 35 703 0 35 703

Total financial liabilities at fair value 0 35 703 0 35 703




Fixed-income securities 35 003 2 086 840 0 2 121 842


Total assets at fair value 35 003 2 174 965 0 2 209 968







Fixed-income securities 134 985 728 866 0 863 851


Total assets at fair value 134 985 771 496 0 906 482





NOTE 6 Fair value hierarchy (continues)

Fair value shall be a representative price based on what a

corresponding asset or liability would have been traded

for at normal market terms and conditions. Highest

quality in regard to fair value is based on listed prices in

an active market. A financial instrument is considered as

listed in an active market if listed prices are simply and

regularly available from a stock market, dealer, broker,

industry group, price-setting service or regulatory

authority, and these prices represent actual and regularly

occurring transactions at arm's length.

Level 1:

Instruments at this level obtain fair value from listed

prices in an active market for identical assets or liabilities

to which the entity has access at the reporting date.

Examples of instruments in Level 1 are stock market

listed securities.

Level 2:

Instruments at this level obtain fair value from

observable market data. This includes prices based on

identical instruments, but where the instrument does not

maintain a high enough trading frequency and is

therefore not considered to be traded in an active market,

as well as prices based on corresponding assets and price-

leading indicators that can be confirmed from market

information. Example instruments at Level 2 are fixed-

income securities priced on the basis of interest rate

paths.

Level 3:

Instruments at Level 3 contain non-observable market

data or are traded in markets considered to be inactive.

The price is based generally on discrete calculations

where the actual fair value may deviate if the instrument

were to be traded.

Note 5 discloses the fair value of financial assets and

financial liabilities that are recognized at amortized cost

and according to the rules on hedge accounting. Financial

assets measured at amortized cost and hedge accounting

comprise lending to and due to credit institutions,

Norwegian municipalities and retail customers. The stated fair value of these assets is determined on terms

qualifying for Level 2. Financial liabilities recognized at

amortized cost and hedge accounting consist of debt

securities issued and deposits. The stated fair value of

these liabilities is determined by methods qualifying for

Level 2.

There have been no transfers between Level 1 and

Level 2.


NOTE 7 Debt securities issued - stock exchange listed covered bonds and certificates

NOK THOUSANDS 30.09.2021 30.09.2020 31.12.2020

Bond debt, nominal amount 17 600 000 18 775 000 17 860 000

Adjustments 35 831 60 603 42 033

Accrued interest 24 902 50 999 23 624

Own holdings, nominal amount -631 000 -896 000 -496 000

Total debt securities issued 17 029 733 17 990 601 17 429 657

Interest rate on borrowings through the issuance of securities on the reporting date:

0.72 % 0.63 % 0.63 %

The interest rate is calculated as a weighted average of the act/360 basis. It includes interest rate effects and amortization costs.

NOK THOUSANDS Balance

sheet 31.12.2020

Issued Matured/

redeemed Other

adjustments

Balance sheet

30.09.2021

Bond debt, nominal amount 17 860 000 2 500 000 -2 760 000 0 17 600 000

Adjustments 42 033 0 0 -6 202 35 831

Accrued interest 23 624 0 0 1 278 24 902

Own holdings, nominal amount -496 000 0 -135 000 0 -631 000

Total debt securities issued 17 429 657 2 500 000 -2 895 000 -4 924 17 029 733

NOTE 8 Over-collateralisation

NOK THOUSANDS 30.09.2021 30.09.2020 31.12.2020

SECURITY POOL

Loans to customers 16 893 064 16 984 048 17 710 745

Financial derivatives (net) 8 732 -39 475 -35 294

Additional collateral ¹ 2 293 027 2 748 833 1 260 821

Total security pool 19 194 823 19 693 407 18 936 272

Outstanding covered bonds incl. own funds and premium/discount

17 763 228 18 977 294 18 022 310

Coverage of the security pool 108.1 % 103.8 % 105.1 %

¹ Additional collateral includes loans and receivables from credit institutions and bonds and certificates. Liquidity reserve are not insluded in

additional collateral.

Section 11-7 of the Regulations on Financial Institutions lays down a requirement for over-collateralisation by at least 2 per cent of the value of the outstanding covered bonds.


NOTE 9 Liabilities to credit institutions


Due date Nominal Accrued interest

Book value

Debt to KLP Banken AS 15.12.2022 300 000 47 300 047




Total liabilities to credit institutions 1 005 000 136 1 005 136

Interest rate on debt to credit institutions at the reporting date: 0.35 %

The interest rate is calculated as a weighted average of the act/360 basis.



Book value







Total liabilities to credit institutions 515 000 53 515 053





Book value



Total liabilities to credit institutions 745 000 103 745 103




NOTE 10 Financial assets and liabilities subject to net settlement


Related sums that are

not presented net

Gross financial

assets/ liabilites

Gross assets/

liabilites presented

net

Book value Financial

instruments Security in

cash

Net recognised

value

ASSETS

Financial derivatives 44 845 0 44 845 -35 222 0 9 623

Total 44 845 0 44 845 -35 222 0 9 623

LIABILITIES

Financial derivatives 35 703 0 35 703 -35 222 0 481

Total 35 703 0 35 703 -35 222 0 481



not presented net

Gross financial

assets/ liabilites

Gross assets


net



cash

Net recognised

value

ASSETS


Total 88 126 0 88 126 -88 126 0 0

LIABILITIES


Total 127 709 0 127 709 -88 126 0 39 584



not presented net

Gross financial

assets/ liabilites

Gross assets/


net



cash

Net recognised

value

ASSETS


Total 42 630 0 42 630 -42 630 0 0

LIABILITIES


Total 77 831 0 77 831 -42 630 0 35 201

The purpose of the note is to show the potential effect of netting agreements at the KLP Kommunekreditt AS. The note shows derivative positions in the financial statement.


NOTE 11 Transactions with related parties

NOK THOUSANDS 01.01.2021

-30.09.2021 01.01.2020

-30.09.2020 01.01.2020

-31.12.2020

KLP Banken AS, interest on borrowing 929 4 246 4 695

KLP Banken AS, interest on deposits -422 -123 -267

KLP Banken AS, administrative services (at cost) 7 441 8 295 11 838

KLP Kapitalforvaltning AS, fees for services provided

38 69 94

NOK THOUSANDS 30.09.2021 30.09.2020 31.12.2020

BALANCES

KLP Banken AS, debt to credit institutions -1 005 136 -515 053 -745 103

KLP Banken AS, deposit 100 689 100 123 100 267

KLP Banken AS, loan settlement 6 816 6 409 237

Net outstanding accounts to:

KLP Banken AS -242 -908 -1 605

KLP Kapitalforvaltning AS 0 0 -24

There are no direct salary cost in KLP Kommunekreditt AS. Personnel costs (administrative services) are allocated from KLP Banken AS.

Transactions with related parties are carried out on general market terms, with the exception of the Company's share of common functions, which is allocated at cost. Allocation is based on actual use. All internal receivables are settled as they arise.

NOTE 12 Other assets

NOK THOUSANDS 30.09.2021 30.09.2020 31.12.2020

Intercompany receivables 6 816 6 409 237

Prepaid expenses 643 678 0

Miscellaneous receivables 5 300 0 0

Total other assets 12 759 7 087 237


NOTE 13 Other liabilities and provision for accrued costs

NOK THOUSANDS 30.09.2021 30.09.2020 31.12.2020

Creditors 0 0 101

Intercompany payables 242 908 1 629

Tax payable 0 0 5 456

Other liabilities 22 861 6 118 1

Total other liabilities 23 103 7 026 7 187

VAT 385 18 36

Total accrued costs and liabilities 385 18 36


NOTE 14 Capital adequacy

NOK THOUSANDS 30.09.2021 30.09.2020 31.12.2020

Share capital and share premium fund 675 000 675 000 675 000

Other owners' equity 69 697 42 627 69 697

Total owners' equity 744 697 717 627 744 697

Adjustments due to requirements for proper valuation

-1 585 -2 122 -864

Core capital/Tier 1 capital 743 113 715 505 743 833

Supplementary capital/Tier 2 capital 0 0 0

Supplementary capital/Tier 2 capital 0 0 0

Total eligible own funds (Tier 1 and Tier 2 capital) 743 113 715 505 743 833

Capital requirement 296 205 304 835 306 180

Surplus of own funds (Tier 1 and Tier 2 capital) 446 908 410 671 437 655

ESTIMATE BASIS CREDIT RISK:

Institutions 83 369 65 182 97 979

Local and regional authorities 3 368 906 3 444 351 3 559 832

Covered bonds 148 465 189 410 58 636

Other items 5 943 678 0

Calculation basis credit risk 3 606 684 3 699 620 3 716 447

Credit risk 288 535 295 970 297 316

Operating risk 7 552 8 746 8 755

Credit valuation adjustment 119 119 110

Total capital requirement assets 296 205 304 835 306 180

Core capital adequacy ratio 20.1 % 18.8 % 19.4 %

Supplementary capital ratio 0.0 % 0.0 % 0.0 %

Capital adequacy ratio 20.1 % 18.8 % 19.4 %

Leverage ratio 3.9 % 3.7 % 3.9 %

CAPITAL REQUIREMENT PER 30.09.2021 Core capital/ Tier 1 capital

Supplementary capital/Tier 2

capital Own funds

Minimum requirement excl. buffers 4.5 % 3.5 % 8.0 %

Protective buffer 2.5 % 0.0 % 2.5 %

Systemic risk buffer 3.0 % 0.0 % 3.0 %

Counter-cyclical capital buffer 1.0 % 0.0 % 1.0 %

Current capital requirement incl. buffers 11.0 % 3.5 % 14.5 %

Capital requirement leverage ratio 3.0 % 0.0 % 3.0 %


NOTE 15 Fixed-income securities

NOK THOUSANDS 30.09.2021 30.09.2020 31.12.2020

Acquisition

cost Market

value Acquisition

cost Market

value Acquisition

cost Market

value

Certificates 99 982 99 976 226 765 227 745 276 564 277 494

Bonds 1 483 793 1 484 651 1 889 887 1 894 098 584 494 586 358

Total fixed-income securities 1 583 775 1 584 626 2 116 651 2 121 842 861 058 863 851

Fixed income securities are brought to account at market value, including accrued but not due interests.

NOTE 16 Contingent liabilites

NOK THOUSANDS 30.09.2021 30.09.2020 31.12.2020

Loan commitment 4 650 192 670 4 650

Total contingent liabilities 4 650 192 670 4 650

NOTE 17 Net gain/(loss) on financial instruments

NOK THOUSANDS Q3

2021 Q3

2020 01.01.2021

-30.09.2021 01.01.2020

-30.09.2020 01.01.2020

-31.12.2020

Net gain/(loss) on fixed-income securities -834 -381 -1 217 301 -83

Net gain/(loss) financial derivatives and realized amortization linked to lending

0 41 0 41 0

Net gain/(loss) financial derivatives and realized repurchase of own debt

-2 024 -1 978 -23 770 -17 867 -19 081

Total net gain/(loss) on financial instruments -2 858 -2 318 -24 987 -17 525 -19 164


NOTE 18 Loan loss provision

Changes in provisions for expected losses in third quarter 2021 are related to changes in lending volume. No other changes have been made to the assumptions or input to the model for calculating loss provisions in the third quarter of 2021. Refer to Note 18 and Note 2 in the annual report for more details of the model.

NOK THOUSANDS 12-month ECL

stage 1

Lifetime ECL not credit impaired

stage 2

Lifetime ECL credit impaired

stage 3 Total

EXPECTED CREDIT LOSS (ECL) - LOANS TO CUSTOMERS, AMORTIZED COST

Opening balance ECL 01.01.2021 174 0 0 174

Transfers to stage 1 0 0 0 0



Net changes -6 0 0 -6

New losses 12 0 0 12

Write-offs -14 0 0 -14

Closing balance ECL 30.09.2021 167 0 0 167

Changes (01.01.2021-30.09.2021) -7 0 0 -7

NOK THOUSANDS 12-month ECL

stage 1

Lifetime ECL not credit impaired

stage 2

Lifetime ECL credit impaired

stage 3 Total

VALUE OF LENDING AND RECEIVABLES FOR CUSTOMERS RECOGNISED IN THE BALANCE SHEET - AMORTIZED COST

Gross lending 01.01.2021 17 592 253 0 0 17 592 253




Net changes -573 073 0 0 -573 073

New lending 1 247 321 0 0 1 247 321

Write-offs -1 407 690 0 0 -1 407 690

Gross lending 30.09.2021 16 858 812 0 0 16 858 812


Quarterly earnings trend

NOK MILLIONS Q3

2021 Q2

2021 Q1

2021 Q4

2020 Q3

2020

Interest income 63.3 68.4 68.2 75.1 80.1

Interest expense -47.1 -50.0 -55.5 -60.1 -55.9

Net interest income 16.1 18.4 12.7 15.1 24.2

Net gain/(loss) financial instruments -2.9 -19.1 -3.1 -1.6 -2.3

Total other operating income -2.9 -19.1 -3.1 -1.6 -2.3

Other operating expenses -4.9 -4.1 -3.9 -6.5 -3.2

Total operating expenses -4.9 -4.1 -3.9 -6.5 -3.2

Operating profit/loss before tax 8.4 -4.7 5.7 6.9 18.7

Tax ordinary income -1.9 1.0 4.2 -1.5 -4.1

Profit for the period 6.6 -3.7 9.9 5.4 14.6

Key figures - accumulated

NOK MILLIONS Q3

2021 Q2

2021 Q1

2021 Q4

2020 Q3

2020

Pre-tax income 9.4 0.9 5.7 34.7 27.8

Net interest income 47.2 31.1 12.7 72.4 57.4

Other operating income 0.0 0.0 0.0 0.0 0.0

Other operating cost -12.9 -8.0 -3.9 -18.5 -12.0

Net gain/(loss) financial instruments -25.0 -22.1 -3.1 -19.2 -17.5

Lending with public sector guarantee 16 842.2 16 752.1 16 734.4 17 654.3 16 932.7

Non-performing loans 0.0 0.0 0.0 0.0 0.0

Total liabilities created on issuance of securities 17 029.7 17 684.5 17 202.7 17 429.7 17 990.6

Other borrowing 1 005.1 255.0 255.0 745.1 515.1

Total assets 18 849.6 18 878.4 18 284.4 19 008.1 19 381.1

Average total assets 18 928.8 18 878.4 18 646.2 18 778.7 18 965.3

Equity 752.0 745.4 749.1 744.7 739.3

Interest net 0.25 % 0.16 % 0.07 % 0.39 % 0.30 %

Profit/loss from ordinary operation before taxes 0.05 % 0.01 % 0.03 % 0.18 % 0.15 %

Return on equity 1.68 % 0.25 % 3.05 % 4.51 % 4.82 %

Capital adequacy ratio 20.1 % 20.2 % 20.3 % 19.4 % 18.3 %

Liquidity coverage ratio (LCR) 7 273 % 242 522 % 6 919 % 55 095 % 248 %

Sensitivitet: Begrenset

KLP KOMMUNEKREDITT AS

Beddingen 8, 7042 Trondheim

Organization no.: 994 526 944

VISITOR ADDRESS

Trondheim: Beddingen 8

Oslo: Dronning Eufemias gate 10

klpbanken.no

Phone: + 47 55 54 85 00

[email protected]

klp kommunekreditt as

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